Disability Insurance Program Seeing Increased Applicants... and Increased Trouble

The Washington Post reported Tuesday that the number of workers seeking disability benefits from Social Security’s Disability Insurance Program has risen. From 2008 to 2009, according to the Social Security Administration, the number of applicants increased 21.4 percent.

As of the end of the second quarter of this year, there were more than 8 million people on the Social Security Disability program’s rolls. Since the end of 2007, there has been an increase of 12.6 percent in the Disability Insurance Trust Fund Program applications (end of 2007 to the end of the second quarter, 2010).

The Post cites economic conditions as the major factor in the increase in program applications. That may be the case, but if this trend continues, the already precarious state of the Disability Trust Fund will become even questionable. The Disability Trust Fund began running deficits in 2005 (excluding interest) and will run out of money in 2018 according to the Social Security Administration’s most recent report. Given the overall state of Social Security (shown in the graph below)  if the increase in applications to the Disability Program continues, the Disability Trust fund may run out sooner than expected (as would the combined OASDI Trust Fund).

As can be seen by the graph above, the Trust Fund will run out in 2018 after a steady drop in value (a ratio of 100 means that assets at least equal projected costs). The rise beginning in the late 1990's as a result of lawmakers in 1994 responding to an earlier SSA report saying that the DI trust fund would run out in 1995. The Social Security Domestic Employment Reform Act of 1994 changed the rate from the total OASDI trust fun going to the DI Trust fund. The law made the following changes;  in 1994 to 1996, the rate  increased from 0.60 percent to 0.94 percent, in 1997 to 1999 the rate increased from 0.60 percent to 0.85 percent and in 2000 the rate increased from 0.71 percent increased to 0.90 percent. Beginning with the year 2000, the DI Trust Fund allocation was increased from 0.71 percent to 0.90 percent .  As CBO states in its recent review of the Disability Program, doing so again would solve the sustainability problem, but would only speed up the eventual depletion of the combined OASDI trust funds.

The recent rise in applications for disability insurance highlights the need for broader Social Security reform now. As we've argued, implementing changes sooner rather than later will give policymakers more options for reform while also giving workers more time to adjust to any changes. The increase in DI applications will speed up the depletion of the program's trust fund after which it will put an additional burden on the OASI Trust Fund. 

Click here for our analysis on the Trustees report, and here for a recent analysis about the cost and size of the Trust Fund gap.